REGENXBIO Inc. (NASDAQ:RGNX) shares have retraced a considerable 28% in the last month, reversing a fair amount of their solid recent performance. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 15% in that time.

Following the heavy fall in price, REGENXBIO may be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 8.7x, since almost half of all companies in the Biotechs industry in the United States have P/S ratios greater than 12.7x and even P/S higher than 64x are not unusual. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

How Has REGENXBIO Performed Recently?

REGENXBIO could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. It seems that many are expecting the poor revenue performance to persist, which has repressed the P/S ratio. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

How Is REGENXBIO's Revenue Growth Trending?

In order to justify its P/S ratio, REGENXBIO would need to produce sluggish growth that's trailing the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 20%. As a result, revenue from three years ago have also fallen 42% overall. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Turning to the outlook, the next three years should generate growth of 45% per year as estimated by the eleven analysts watching the company. With the industry predicted to deliver 164% growth per annum, the company is positioned for a weaker revenue result.

In light of this, it's understandable that REGENXBIO's P/S sits below the majority of other companies. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

What Does REGENXBIO's P/S Mean For Investors?

REGENXBIO's recently weak share price has pulled its P/S back below other Biotechs companies. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

As we suspected, our examination of REGENXBIO's analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

You should always think about risks. Case in point, we've spotted 3 warning signs for REGENXBIO you should be aware of.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.